Are US Companies Using Too Much Real Estate?

Realcomm, the technology focused real estate web site, recently published an article entitled “The Data is Coming In: Corporate America is Using Less Than 50% of Its Real Estate.” This is no surprise; I remember from my own experience that our offices were nearly 30%-50% vacant at any one time. This was over 15 years ago. With today’s technology, the need for dedicated, assigned office spaces, on a one office to employee ratio is simply unnecessary and wasteful. With the advent of mobile technology, enabling anywhere, anytime work activities, much of the rationale for dedicated work stations or worse, private offices, quickly disappears.

Another impact of technology is the elimination of space for file storage. With the advent of cloud computing and enormous electronic file storage capacity, at least 20%-30% of traditional office space for file storage is eliminated.

Finally, the private office is becoming obsolete; except for work that requires strict confidentiality such as human resource activities, or legal activities, a need for privacy is reduced. Current management practices also prefer to avoid the private office as a symbol of power and authority. There are many examples where company CEOs utilize a cubicle instead of a large private office. John Chambers, CEO of Cisco, has used a cubicle office for years. This practice communicates teamwork, collaboration, and a non-hierarchical culture.

Offices require enormous cost: space rental, utilities, maintenance, tenant improvement amortization, security, depreciation, taxes, insurance all add up whether the space is occupied or not. When we did the Agile Workplace project at Gartner over twelve years ago, we calculated that half the occupancy costof the corporate campus was essentially a dead weight loss, since a high percentage of employees were working remotely. We made a strong case for shared office strategies including office hoteling, and desk sharing. These techniques are becoming mainstream in most US enterprises, along with such techniques as co-working and teleworking.

There are a myriad of applications which support office hoteling: that give the employee the capability of reserving a workstation, private office, or conference room. In some cases this functionality is available in the workplace management system.

These trends suggest that corporate real estate managers take a hard look at their current and projected office space utilization. Key questions to ask include:

·      Do our office standards reflect the reality of a highly mobile work force?

·      Have we piloted various alternative workplace strategies such as desk sharing, telecommuting, or co-working?

·      What is the actual utilization of our current office space? And if over supplied, what can we do to consolidate or reduce the office footprint?

·      What’s the financial impact of this over supply in office space?

Information technology is transforming every aspect of our society. Certainly retail has been transformed by the internet and mobile technology, not to mention entertainment, education, and medical services, and the vast changes brought about by social media. It’s not surprising that technology is fundamentally transforming commercial real estate in profound ways; and the most obvious example is how technology has reduced the demand for office space. This reality is yet another reason to insure you have a modern, up to date lease management systems to track and control your lease commitments.